MA Bill to Clear Title on Foreclosed Properties

On December 31, 2015, a MA bill to clear title on foreclosed properties was signed into law. This is great news for anyone who may have purchased a property that was previously foreclosed. Below, we provide some helpful information to understand the details of this law, its impact, and why it’s needed.

The Foreclosure Title Issue

It is common for mortgages to get transferred from one lender to another. During this transfer process, paperwork may not always be completed properly. The most recent lender may foreclose on a property without clearing up such title defects. The Massachusetts home may actually be sold multiple times after foreclosure. An individual who owned the home prior to the foreclosure may actually file suit claiming that the foreclosure was not valid to begin with, or the title issue can prevent the current owner from having a clear title to sell the home. In either case, the current homeowner may inherit a big problem.

Details of the MA Bill to Clear Title on Foreclosed Properties

The new bill signed into Massachusetts law by Governor Baker provides some resolution to this issue. First, it sets a three year statute of limitations for previous owners to file a lawsuit challenging the validity of a foreclosure. This applies to any new foreclosures after the bill’s passing on December 31, 2015. For foreclosures already completed prior to that, the deadline will be December 31, 2016 for past homeowners to file suit. After these timeframes have passed, the Massachusetts foreclosures shall be considered valid.

Impact of this Bill

Prior to this bill, individuals who owned properties that were previously foreclosed upon would have to work with their title companies to clear any known defects in order to sell their home. Due to the backlog at title companies, this could take a long time to complete. Additionally, there was also the danger of a lawsuit by a previous homeowner claiming that the property was still rightfully theirs (due to an improper foreclosure). This danger could be present for an indefinite period of time and make a property very difficult to sell. This MA bill to clear title on foreclosed properties law helps protect the rights of current homeowners and gives them a more definitive time frame for resolution.

Update: Anti-foreclosure activists have filed a petition to repeal this new law. Stay tuned for updated information on this!